Today the Office of Foreign Assets Control (“OFAC”) announced that it fined Production Products, Inc., a small family-run business in Maryland, the sum of $78,500 in connection with charges that the company exported HVAC duct manufacturing equipment to a company in China on the Specially Designated Nationals and Blocked Persons List. OFAC noted that, because the equipment was valued at $500,000, it could have fined the company $1 million and touted its own beneficence in imposing such a reduced fine. Given that the maximum fine would likely have been a death blow to the company, this is somewhat equivalent to claiming that someone should be grateful because, although you could have killed them, you decided only to cut off a few fingers.
OFAC noted a number of “aggravating factors” that had gotten its dander up, all of which boil down to the fact that PPI had no idea that there was an SDN List and had no idea that it needed to check it or have a — gasp! — compliance program. Apparently not having an OFAC compliance program is the new Eighth Deadly Sin, ranking only slightly behind sloth and lust.
Rather than being an opportunity to add to the Federal coffers, this case should have been an opportunity for governmental self-reflection. Shouldn’t OFAC ask itself why this company — like millions of other small companies — has never heard of OFAC or its SDN List? These companies almost certainly know that there are certain things — guns, explosives and the like — that they can’t export but would be shocked (and justifiably so) to learn that you can’t ship so much as a pencil to a company in China on the mysterious list without suffering grievous consequences.
But instead of wondering why so many people have not heard of OFAC or its rules, OFAC gets its feelings hurt and lashes out with penalties. It seems to me that the efforts used to punish people for not knowing about OFAC might be better shifted to educational efforts to deal with the fact that so few small companies are aware of their obligations with respect to the SDN List.